Up and Down

Interest rates go up and down, depending on what is happening in the economy.  When times are tough, interest rates go down to entice people who are apprehensive about borrowing money to get in debt. When times are good, the rates go up since people are more open to taking on additional liabilities to get the things they want.

Rising interest rates can be good and bad. Especially if you have consumer debt.

Credit cards take a beating – or a I should, you, the credit card holder – takes a beating. A card with a $10,000.00 balance and an interest rate of 16.83% could see an increase of $25 a month just on a quarter-point rise in interest rates. That’s $300 in a year all thanks to interest.

Auto and student loans and mortgages on a fixed rate will not have a noticeable increase. Or at least they shouldn’t.  When the loans were taken out,  the rate of interest was fixed at that time. However, if you take out a loan when the interest rates are high, you are locked in to that rate even if the rates go down.

A bonus to rising interest rates is that the rates not only rise on your debt but also on your savings. So the less money that has to go on debt and the more that goes into savings is a bonus. With the higher interest rates, your savings will grow a little more each month so take advantage of it!

The moral of this is pay off y our debt! As soon as you can. Use the snowball method and watch that debt disappear. Pay as much as you can towards the smaller balance while making the minimum on the larger amounts. As soon as you get that smaller balance paid off, get rid of the card and start putting as much as you can towards the next smallest debt. And so on.

Also, save money. Put away as much as you can without hurting your other goals. The funny things is that when you start saving  - even just five dollars a month – you start finding more ways you can stop spending and start saving. It becomes fun!

Another thing to remember about interest rates: they will always go up and down!

Thanks to Dave Ramsey - https://www.daveramsey.com/blog/rising-interest-rates - for the information in this article.

Do you want to learn the 5-step process I used to save myself over $400,000.00 in future credit card interest charges? Then join the 7 Days Towards Financial Stability Challenge either through my Faceboook group or through email. Go to www.karenmagill.com to learn more.